Please help me with the journal entries, thank you.
On June 1, Maxwell Corporation (a U.S.-based company) sold goods to a foreign customer at a price of 1,400,000 pesos and will receive payment in three months on September 1. On June 1, Maxwell acquired an option to sell 1,400,000 pesos in three months at a strike price of $0.110. The time value of the option is excluded from the assessment of hedge effectiveness, and the change in time value is recognized in net income over the life of the option. Relevant exchange rates and option premia for the peso are as follows:
| Date | Spot Rate | Put Option Premium for September 1 (strike price $0.110) |
| June 1 | $ | 0.110 | | $ | 0.0073 | |
| June 30 | | 0.109 | | | 0.0046 | |
| September 1 | | 0.108 | | | N/A | |
| |
Maxwell must close its books and prepare its second-quarter financial statements on June 30.
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a-1. Assuming that Maxwell designates the foreign currency option as a cash flow hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars.
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a-2. What is the impact on net income over the two accounting periods?
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b-1. Assuming that Maxwell designates the foreign currency option as a fair value hedge of a foreign currency receivable, prepare journal entries for the export sale and related hedge in U.S. dollars.
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b-2. What is the impact on net income over the two accounting periods?
1 06/01 154.000 Accounts receivable (P) Sales 154,000 N. 2 06/01 10.220 Foreign currency option Cash elo 10,220 3 06/30 1.400 Foreign exchange gain or loss Accounts receivable (P) OC 1,400 4 06/30 Other comprehensive income Foreign currency option 5 06/30 Other comprehensive income Foreign exchange gain or loss 6 06/30 Foreign exchange gain or loss Other comprehensive income OO 7 09/01 Foreign exchange gain or loss Accounts receivable (P) Q 8 09/01 Other comprehensive income Foreign currency option OO 9 09/01 Other comprehensive income Foreign exchange gain or loss Oo 10 09/01 Foreign exchange gain or loss Other comprehensive income 11 09/01 Foreign currency (P) Accounts receivable (P) O 12 09/01 Cash Foreign currency option Foreign currency (P) 000 Complete this question by entering your answers in the tabs below. Reg A1 Reg A2 Req B1 Reg B2 What is the impact on net income over the two accounting periods? (Do not round intermediate calculations. Negative amount should be entered with a minus sign.) Impact on net income Assuming that Maxwell designates the foreign currency option as a fair value hedge of a foreign currency receivable, P journal entries for the export sale and related hedge in U.S. dollars. (Do not round intermediate calculations. If no entr required for a transaction/event, select "No journal entry required" in the first account field.) No Date General Journal Debit Credit 1 06/01 Accounts receivable (P) Sales 2 06/01 Foreign currency option Cash 3 08/30 Foreign exchange gain or loss Accounts receivable (P) 4 08/30 Foreign exchange gain or loss Foreign currency option 5 06/30 No journal entry required 6 08/30 No journal entry required > 7 09/01 Foreign exchange gain or loss Accounts receivable (P) 8 09/01 Foreign exchange gain or loss Foreign currency option D 9 09/01 No journal entry required 10 09/01 > No journal entry required 11 09/01 Foreign currency (P) Accounts receivable (P) 12 09/01 Cash Foreign currency option Foreign currency (P) > Reg A1 Reg A2 Req B1 Reg B2 What is the impact on net income over the two accounting periods? (Do not round intermediate calculations. Negative amount should be entered with a minus sign.) Impact on net income 1 06/01 154.000 Accounts receivable (P) Sales 154,000 N. 2 06/01 10.220 Foreign currency option Cash elo 10,220 3 06/30 1.400 Foreign exchange gain or loss Accounts receivable (P) OC 1,400 4 06/30 Other comprehensive income Foreign currency option 5 06/30 Other comprehensive income Foreign exchange gain or loss 6 06/30 Foreign exchange gain or loss Other comprehensive income OO 7 09/01 Foreign exchange gain or loss Accounts receivable (P) Q 8 09/01 Other comprehensive income Foreign currency option OO 9 09/01 Other comprehensive income Foreign exchange gain or loss Oo 10 09/01 Foreign exchange gain or loss Other comprehensive income 11 09/01 Foreign currency (P) Accounts receivable (P) O 12 09/01 Cash Foreign currency option Foreign currency (P) 000 Complete this question by entering your answers in the tabs below. Reg A1 Reg A2 Req B1 Reg B2 What is the impact on net income over the two accounting periods? (Do not round intermediate calculations. Negative amount should be entered with a minus sign.) Impact on net income Assuming that Maxwell designates the foreign currency option as a fair value hedge of a foreign currency receivable, P journal entries for the export sale and related hedge in U.S. dollars. (Do not round intermediate calculations. If no entr required for a transaction/event, select "No journal entry required" in the first account field.) No Date General Journal Debit Credit 1 06/01 Accounts receivable (P) Sales 2 06/01 Foreign currency option Cash 3 08/30 Foreign exchange gain or loss Accounts receivable (P) 4 08/30 Foreign exchange gain or loss Foreign currency option 5 06/30 No journal entry required 6 08/30 No journal entry required > 7 09/01 Foreign exchange gain or loss Accounts receivable (P) 8 09/01 Foreign exchange gain or loss Foreign currency option D 9 09/01 No journal entry required 10 09/01 > No journal entry required 11 09/01 Foreign currency (P) Accounts receivable (P) 12 09/01 Cash Foreign currency option Foreign currency (P) > Reg A1 Reg A2 Req B1 Reg B2 What is the impact on net income over the two accounting periods? (Do not round intermediate calculations. Negative amount should be entered with a minus sign.) Impact on net income
